Would It Be Wise to Invest in Medical Marijuana Stocks?
Before the recent state-by-state trend of cannabis legalization in the United States, you would be forgiven for thinking the phrase “investing in marijuana” was a euphemism for bringing home a new bong. However, as legalization sweeps through the United States and its North American neighbors, putting your money in cannabis and medical marijuana businesses can be a sound, safe way to grow some green (cash, that is). Before making the plunge with your savings, though, it’s essential to understand the advantages and disadvantages of investing in medical marijuana.
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The Benefits of Investing
While marijuana remains illegal on the federal level, it seems as if it’s only a matter of time before that changes. Currently, 10 states have legalized the use of cannabis for recreational purposes, and 33 have given the official okay to medical marijuana. Further, the recently signed Farm Bill legislation has removed the ban on hemp (a plant similar to cannabis but without its psychoactive compounds), and hemp and cannabis events have spread across the nation. The trend continues outside America’s borders, with its immediate neighbors to the north and south, Canada and Mexico, allowing cannabis on the federal level.
As this growth continues, the amount of money spent on medical marijuana domestically and internationally is expected to grow at a rapid clip. Some estimates show Canada’s total marijuana sales to jump from $600 million in 2017 to just under $5.5 billion in 2022, with the global total tripling in that same period.
With graph lines on the growth chart rising that dramatically to the right, it’s no wonder that some big players are having conversations with comparable cannabis companies. Coca-Cola stated in late 2018 that they were eying the cannabis drink market, and Constellation Brands, the brewer behind beers like Corona, invested an additional $4 billion in Canopy Growth, a cannabis drink company.
The Cons of Investing
There’s no doubt the allure of making lots of money in a new market can be intoxicating, but there are some potential concerns to be aware of before investing. First and foremost, while the trend line for cannabis is spending is rising rapidly, that’s no guarantee that trends will continue. After all, marijuana is still illegal on the federal level, even for medicinal purposes. Because of that distinction, national politics could put a damper on any federal friendly feelings towards medical marijuana and cannabis.
The other notable reason to pump the breaks on your investment trip is that many medical marijuana stocks appear to already have their potential growth factored into their current purchase price. Typically, for most industries, the price to sales ratio hovers somewhere around eight. For the three major players in the Canadian cannabis industry, though, the ratio is somewhere near 159. A ratio that high means you’ll potentially only make your investment back if the company continues its unprecedented growth rate.
Contact Vendors or Speakers
It’s understandable to have questions about placing your hard-earned money in the hands of the medical marijuana industry. Luckily, Indo Expo, the premier cannabis trade show, is able to answer your questions with the vendors or speakers present and put you in touch with industry insiders and experts. Whether you’re a business looking for an investor or an investor looking to put his or her money to use, Indo Expo can help you find the answers and opportunities. Get in touch with a speaker or vendor to learn more about your next potential investment.